The State Department says new settlement activity raises serious questions about Israel's commitment to a peaceful solution with the Palestinians.

Labourers work at the construction site of a new housing project at the Jewish settlement of Gilo in Israeli-annexed Arab East Jerusalem. (File)

The United States has slammed as "provocative" Israeli plans to build hundreds of new settlement homes in annexed East Jerusalem, saying they seriously undermined the prospect of peace with the Palestinians.

"We are deeply concerned by reports today that the government of Israel has published tenders for 323 units in east Jerusalem settlements," State Department spokesman John Kirby said in a statement on Wednesday.

"This follows Monday's announcement of plans for 770 units in the settlement of Gilo."

"These steps by Israeli authorities are the latest examples of what appears to be a steady acceleration of settlement activity that is systematically undermining the prospects for a two-state solution," Kirby said.

"We remain troubled that Israel continues this pattern of provocative and counterproductive action, which raises serious questions about Israel's ultimate commitment to a peaceful, negotiated settlement with the Palestinians."

"More than 650 Palestinian structures have been demolished this year, with more Palestinian structures demolished in the West Bank and east Jerusalem thus far than in all of 2015," he said.

"As the recent Quartet report highlighted, this is part of an ongoing process of land seizures, settlement expansion, legalisations of outposts, and denial of Palestinian development that risk entrenching a one-state reality of perpetual occupation and conflict."

Israel occupied the West Bank and East Jerusalem in 1967. It later annexed East Jerusalem, which Palestinians view as their future capital.

The status of Jerusalem has been among the most contentious issues in peace negotiations, which have been at a standstill since April 2014.